This week brings us the release of only four monthly economic reports that may affect mortgage rates with one being considered of high importance. In addition to the data, we also have the last FOMC meeting of the year that may create afternoon volatility midweek. Tomorrow is the only day of the week with nothing scheduled that needs to be watched.
November's Industrial Production report will start this week’s calendar at 9:15 AM ET Tuesday. This moderately important report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts are calling for a 0.3% rise in output. A decline will be good news for bonds and mortgage rates, while a stronger reading would show manufacturing strength and be considered unfavorable.
The big economic news of the week will be November's Retail Sales report at 8:30 AM ET Wednesday that will give us insight into consumer spending. This data is highly important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rapidly rising spending raises the possibility of seeing solid economic growth and stronger inflation. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in sales will likely drive bond prices lower and mortgage rates higher. Analysts are expecting to see a decline of 0.2% in November's sales, meaning consumers spent less last month than in October. Favorable results for mortgage rates would be a larger decline that showed weaker economic activity.
There are also some significant FOMC events Wednesday that can be highly influential on the financial and mortgage markets. The two-day FOMC meeting that begins Tuesday will adjourn at 2:00 PM ET Wednesday. There is a wide consensus that Fed Chairman Powell and friends will leave key short-term interest rates unchanged at this meeting. Market participants will be focused on what the Fed may do to boost economy activity since their repeated calls for Congress to pass another stimulus bill have been unsuccessful. Of particular interest is the rate of asset purchases such as Treasury and mortgage securities. At the same time their post-meeting statement is made, they will also release revised economic projections that are expected to have weakened since their last update. Those will be followed by a press conference with Chairman Powell at 2:30 PM ET. This meeting may not bring as much anxiety as some do, but we still could see a heavy response Wednesday afternoon. There is the potential for it to be a very active afternoon for mortgage rates.
Besides weekly unemployment figures, we also have a relatively minor monthly economic report also scheduled for early Thursday morning. November's Housing Starts data isn't known to be highly influential to bonds or mortgage pricing, but it does give us an indication of housing sector strength by tracking new home groundbreakings. Analysts are expecting to see little change in new home starts, pointing to flat activity last month in the new home portion of the housing sector. Slowing starts would be favorable for the bond market, although a wide variance is likely needed for the data to cause noticeable movement in the markets or mortgage rates Thursday morning.
November's Leading Economic Indicators (LEI) from the Conference Board will close out this week’s calendar late Friday morning. The LEI attempts to measure or predict economic activity over the next three to six months. It is expected to show a 0.4% increase, meaning that it is predicting moderate economic growth over the next several months. This probably will not have much of an impact on bond prices or affect mortgage rates either unless it shows a much stronger reading. The weaker the reading, the better the news it is for bonds and mortgage pricing.
Overall, Wednesday is clearly the most important day of the week because of the sales data and the FOMC events. The calmest day for rates could be Tuesday or Friday. Despite the lack of a high number of scheduled economic releases, we still could see significant movement in the markets and mortgage pricing this week. Therefore, it would be prudent to watch them closely if still floating an interest rate and closing in the near future.